How mortgage company insurance checks work.
When a home has a mortgage, the insurance check for a new roof often can't be cashed by the homeowner alone. Here's what happens next and why these checks stall.
Why the lender is on the check
When a home has a mortgage, insurance checks are often made out to both the homeowner and the lender. The lender has a financial interest in the home, so it wants to make sure the repairs are actually completed before the money is released.
How the money gets released
The homeowner has to endorse the check, and then the lender's loss draft department decides how and when to release the money. Lenders may ask for some or all of the following:
- The signed contract
- An invoice for the work
- A W9 from the contractor
- A lien waiver
- An inspection of the completed work
Some lenders release the funds in stages instead of all at once.
Why these checks stall
Most homeowners have never been through this process, so without someone to guide them, the check usually sits untouched. Requests from the lender can also go unanswered for weeks when nobody owns the follow up.
Questions roofers ask
What is a loss draft department?
It's the team at a mortgage company that handles insurance claim money for homes they finance. When an insurance check includes the lender's name, the loss draft department controls how the money is released, and it often asks for documents or an inspection first.
Can the homeowner deposit the check without the lender?
Usually not. When the lender is named on the check, the lender normally has to endorse it or release the funds through its loss draft department.
How long does it take a lender to release the funds?
It depends on the lender and on how quickly its requests are answered. Sending complete paperwork early and following up steadily are the best ways to keep the money moving.
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